Finastra's Ruggiero Ready to Go Cold Turkey on Air RFPs

When Finastra director of global travel management Mauro Ruggiero completed his airline RFP two years ago, it might have been the last time he ever goes through the process.

The U.K.-based financial software firm, which has upwards of $25 million in annual airline spending covering almost 130 countries, now is asking its airline partners for evergreen contracts, without expiration dates and tweaked during quarterly business reviews. Those reviews essentially will be a renegotiation every quarter, making sure the contract is best suited to Finastra's current travel patterns, he said.

Recovering the time spent on the RFP process was a big driver of the decision. "The RFP process is quite cumbersome and very inefficient," Ruggiero said. "The length of time to get it done was a big pain point."

Quarterly reviews, of course, take time as well, but Ruggiero said he already required them for all airlines in the program. With an evergreen contract, such a review can be "a constructive meeting on how to move forward" rather than just an evaluation of set contract terms, he said. "The quarterly review should be about how we're helping each other, rather than just, 'Here's what we've done,'" he said.

Regularly adjusted terms also make better sense for Finastra's travel patterns, which are project-based, making it difficult to project spikes in travel to certain markets two years out. 

At the same time, Ruggiero said he didn't want to have to wait until the next RFP to incorporate new routes, such as the service Virgin Atlantic began in September between London and Tel Aviv, into a contract.

"If I'm asking my professional services group today what's happening in the next six months, next month that might change," he said. "We're giving airlines criteria that by next month are already old. Having a living document and continuously going back and forth benefits on their end."

That lag between providing data and action is one of the key weaknesses of the airline RFP process, said Olivier Benoit, VP and global air practice leader for BCD consulting unit Advito, which offers a service, Dynamic Program Management, to consistently adjust supplier relationships based on regular data analysis.

"When a program starts with an RFP, that's it, but a dynamic approach is to be constantly renegotiating and providing more incremental savings," Benoit said. "Even one month after a program has started, you can identify elements that could be better."

At the same time, the average savings from air RFPs have been on a downward trend, he said. Benoit estimated the current average incremental savings rate gained from using the traditional RFP process to be about 1 percent, a percentage point lower than it was two years ago. Part of that is due to increasing sophistication in airline pricing and inventory availability and non-negotiable parts of the fares, such as fuel surcharges, as well as competition to negotiated fares from promotional fares, TMC fares and rebooking technology that monitors for lower fares.

The dynamic approach to a program on average has savings 50 percent higher than one reliant on the RFP, Benoit said.

Nina & Pinta partner Jo Lloyd said a major shortfall of relying on the RFP, besides it being a "hugely laborious, time-consuming process," is that airlines usually base decisions mostly on key competitive routes. That, however, might cover only a small portion of a company's total air spend.

"If you're looking at it from a procurement perspective, if you spend X amount of millions with this particular airline, you should expect to be recognized for all the millions you're spending on that carrier, not just on a specific route," she said. "If the organization has 30 or 40 percent of its spend on key origins and destinations, and the rest of the spend is wider spread, it becomes difficult for them to maximize and optimize their air program."

So far, Ruggiero said he's fielded interest from two of the three major airline joint ventures about the approach—"They're happy with the direction, because that's where they're heading," he said—and he intends to implement it across his entire program. One of his bargaining chips is a recent push in traveler engagement, which has driven program compliance up significantly and demonstrates his ability to shift share. The engagement program has included spot surveys asking about flight experiences, targeted emails to groups lagging in compliance, messaging through mobile apps and merchandizing, such as banner ads, via Concur on key routes. Over about six months, adoption moved from about 50 percent to nearly 100 percent, Ruggiero said.

Delta SVP of global sales Bob Somers said he is interested in evergreen contracts from several corporate customers, particularly those with consistent travel footprints and spend. Delta is not pushing such deals but rather working with those customers who want to use that approach, he said.

"It's really driven by the travel manager's desire to do so," Somers said. "We are focused on delivering the choice that travel managers want, and our goal is to be flexible in the negotiation process."

In Defense of the RFP 

Still, that choice often will include the traditional RFP. CWT Solutions Group director for the Americas Chris Sabby said about 60 percent of the organization's clients still use a traditional RFP approach, some of whom have the process as a standard compliance requirement. 

"At some point, you do have to go out and see what's in the marketplace," GoldSpring Consulting partner Neil Hammond said. "You need to go out and make a full-blown assessment of your program and the industry. If you have primary relationships with two of the three legacy carriers, you have to bring the third one in occasionally to get opportunities on the table."

That assessment should consider changes in carriers' networks, route structures, alliance and JV partners and mergers and acquisitions, he said. In addition, companies need to assess their own shifting travel patterns and changes since the last RFP, such as mergers and acquisitions.

Even so, that assessment does not necessarily need to be a "full-blown, traditional RFP," Hammond said. For example, a buyer might let incumbent airlines skip the first round, but even a partial process will "make sure a program is set up with the best configuration and that everybody is really delivering," he said.

Those regular assessments are not a substitute for constant optimization either, he said.

"I'm certainly not going to say the RFP is the be all and end all of an airline program," Hammond said. "It's always healthy in the whole cycle to have a focus on nurturing the relationships and improving what you have on the table. We certainly don't think set-and-forget with a contract is good in any relationship."

In that regard, some of Ruggiero's approach can be tailored even for those still using the RFP. For example, CWT's Sabby said quarterly, or more frequent, meetings with airlines should focus on "the opportunity to collaborate on areas where the contract can be enhanced," as "the days of reviewing only underperforming markets are declining." In addition, buyers should expand their contact beyond the sales team to include executive-level interaction between both the airline and client, which can "drive support across all areas of the company and also bring exposure to the client value within the airline leadership teams," he said.

"Don't move away from the RFP process indefinitely. Use it as one of the potential options to further expand the program and help drive traveler experience, savings and partner value," Sabby said. "The preferred contract can serve as the basis of the partnership, but it should also provide a platform for continued monitoring and improvement."

Expanding the Strategy

Beyond airlines, Ruggiero is looking to follow a similar model with his hotel program. Rather than conduct annual hotel RFPs, he's aiming to work out two-year agreements that are adjusted regularly throughout the contract life. As with airlines, it is difficult to anticipate hotel program needs a year in advance, he said.

"There was one project where we had picked up 250 room nights in Stockholm," Ruggiero said. "By the time we negotiated for the hotel in Stockholm, the project had finished."

Aside from jettisoning or lessening the frequency of RFPs, Ruggiero said the model is simply how he prefers to do business.

"I like to treat the vendors I use as partners," Ruggiero said. "The goal is to create a win-win environment for both sides. If you have a true partner relationship, you should be talking to them anyway."